SAN FRANCISCO (Reuters) - A carbon tax proposal outlined on
Thursday by California Senate leader Darrell Steinberg would
raise an estimated $3.6 billion in its first year, revenue he
said would go into the pocketbooks of the state's poorest
residents as well as public transportation.

The tax, which would apply to fuels like gasoline, would start at
15 cents a gallon in 2015 and rise to 24 cents a gallon in 2020,
Steinberg said in a speech at the Sacramento Press Club.

Poverty in the state is growing and money raised by the tax would
be returned to low- and moderate-income working people via a
federal tax credit, Steinberg said. It would also help plug
funding shortfalls in public transit.

The tax would halt plans to bring fuels under the state's cap and
trade program next year, a policy that since the beginning of
2013 has regulated the emissions of heat-trapping greenhouse
gases from large stationary sources, such as power plants and
cement factories.

Cap and trade sets a gradually declining limit on the amount of
greenhouse gases businesses can emit and allows for the trading
of excess permits on the open market.

A carbon tax is a simper system to administer than cap and trade,
but instead of setting an environmental target, it hopes to
discourage driving by raising the price of gasoline.

In a speech on Thursday, Steinberg said he fears that the market
could produce price volatility at the pump, a result that would
hurt consumers and may undermine California's pioneering effort
to combat climate change through its landmark 2006 law,

AB 32.

"If gas prices spike and fluctuate wildly, I am concerned that
the climate change skeptics will use the crisis to unravel AB 32
and weaken our essential climate goals," he said.

Passage of the tax is considered a long shot given that
California law requires any new tax to gain the support of
two-thirds of members in both chambers of the state legislature.

The proposal was also met with resistance from environmentalists,
who believe the current policies are well designed and should not
be tampered with.

"We don't support pulling the rug out from something that has
been carefully negotiated for going on seven years," said Alex
Jackson of the Natural Resources Defense Council.

State Senator Fran Pavley, the author of AB 32, called exempting
oil companies from the cap and trade program a "nonstarter."

"Letting oil companies play by different rules than other
polluters would undermine all the progress we've made on climate
change and send mixed signals to businesses investing in clean
energy and reducing pollution in disadvantaged communities,"
Pavley said on Thursday.